Looking for an Investing Idea? – Here’s Two

by James on August 6, 2013 · 6 comments

Folks,

Sometimes coming up with sound investing ideas can be a challenge.  If you’ve got some cash to invest and are looking around for a home for your green, here are a couple of investing ideas you could consider.

First, off you could consider putting some money in Yahoo, Inc.  A lot of ink has been spilled over the company’s new CEO, Marissa Mayer.  However it looks like she’s been making some favorable moves. The company has been losing money on search and content applications, but Mayer has been acquiring smaller start ups in order to build up yahoo’s talent pool.  She’s also focused the business more heavily on mobile applications, on content provision and has deprioritized search.

YHOO is only marginally profitable, and its last quarterly reports showed a 7% earnings decline and a 2% increase (1, 2), respectively.  Investors don’t seem to care about the marginal finances of the company – the stock has risen from $15.98 when Mayer came on about a year ago, rising to $27.96 today.

yahoo inc stock

 

The way to make some money off this would be a short term momentum trade. That is, jump in and hold for a couple of months while waiting for the price to go higher.  The company is still trading at a P.E. of 7.6 – so there might be some room for growth in the price.   That said, YHOO doesn’t seem like a good long term bet.  Mayer’s new business model hasn’t proven that it can turn Yahoo around. So this would be a strictly short term hold.

donald_yacktmanSecond, you could trust your money with Donald Yacktman.  If you haven’t heard of Yacktman, he is one of the original value investors.  These are the guys who like to buy a dollars worth of stock for 80 cents.  Born in 1968, Yacktman is the CEO of Yacktman Asset Management and had a long history of successfully managing mutual funds. In 1991 he was Morningstar’s Portfolio Manager of the Year. Most recently his fund – appropriately called The Yacktman Fund – has beaten the socks off the markets.  Over the past 4 years Don’s funds have seem something like 30 fold returns (1).  Its hard to do better than that – I’d be smiling too!

So how can you make money from this?  Consider taking a position in one of Don’s mutual funds.  The ticker symbols are YACKX and YAFFX. The minimum investment for both is $2,500.  You’ll want to know more before pulling the trigger, so CNN Money has a pretty good write up.

Happy investing!

If you have any ideas you’d like to share, feel free to leave a comment. We’d love to hear about them.

 



{ 6 comments… read them below or add one }

1 No Waste August 6, 2013 at 10:17 am

I’ve burned myself so many times trying to trade actively that I’m just a boring old Boglehead now.

I’m amazed at managers that can consistently beat market returns year after year and not do it by cheating.

2 Michael | The Student Loan Sherpa August 6, 2013 at 8:59 pm

I’m probably too conservative. I tend to just go with index funds and hold on to them for the long run. I don’t trust myself to properly time a short term hold like Yahoo.

3 James August 6, 2013 at 9:07 pm

Hey NW – thanks for dropping by. If you hold index funds you’ll guarantee market performance..which is fine. But you wont do any better…or any worse than the market.

Plus, I feel like a lot of personal finance wisdom hasn’t served the country well over the past few years. The economy is getting better but a lot of Americans are still living on the edge and I think the the conventional wisdom..buy and hold mutual funds…save 10% of your salary…contribute to your 401k…may be part of that.

4 James August 6, 2013 at 9:08 pm

Michael, great internet handle…”The Student Loan Sherpa”…I love it.

5 TheStockJock August 9, 2013 at 3:42 pm

Beating the index using index ETFs.
Holding an index based ETF that has low tracking error, reasonable liquidity and is optionable is the foundation for outpacing the index while taking on less risk, well….at very least no more risk than by simply indexing. The secret is the optionable part where you can hold option spreads that you can either tailor based on what you feel market is likely to do or you can set spreads such that you’re very close to neutral between the Calls and Puts that you hold. So long as 1. Time continues to progress, 2. The stock market continues to exist in the same relative state, 3. The underlying doesn’t go bankrupt (indexed ETF is pretty low odds) and finally 4. there are still enough traders/managers etc. who will use options to hedge/enhance performance that there is liquidity in the options then you can enhance the performance of any index play through a simple option spread. The more you have underlying the closer to front month options you can trade the bigger % you will be able to add to your returns but it’s not something that still can’t do with a fairly small amount to start with just have to take smaller spreads and longer dates so the % you collect on the time decay is smaller.

Anyhow just another option if Indexing is your preferred choice. Maybe James will be so kind as to write up a full article detailing this with some examples. A comment box is obviously not the right place to get into great detail but I think I’ve provided enough to more or less figure out the basics of it.

Former DINK,
TheStockJock

6 James August 21, 2013 at 8:50 pm

StockJock,

Great ideas – could you shoot me an email at some point to discuss? I don’t exactly understand how the process works just based on our quick exchange.

james.c.hendrickson@gmail.com

James

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